Looking Ahead to the 2026 Q1 Earnings Season
Note: The following is an excerpt from this week’s Earnings Trends report. You can access the full report that contains detailed historical actual and estimates for the current and following periods, please click here>>>
Here are the key points:
- With the end-point of the 2025 Q4 earnings season approaching, we can confidently claim that corporate profitability is not only strong but also showing clear signs of improvement in key aspects. The improvement is particularly notable with respect to the revisions trend, with earnings estimates for the current and coming periods steadily moving up.
- For 2026 Q1, total S&P 500 earnings are currently expected to increase by +11.3% from the same period last year on +8.4% higher revenues.
- The Tech sector has been a critical growth pillar since 2023 Q3 and is expected to play that role in 2026 Q1 as well, with expected earnings growth of +23.7%. Excluding the Tech sector’s substantial contribution, Q1 earnings growth for the rest of the S&P 500 index would be +5% (vs. +11.3% otherwise).
- A total of 10 Zacks sectors are expected to enjoy positive earnings growth in 2026 Q1, including the Tech, Finance (+19%), Basic Materials (+14.6%), Autos (+12.9%), and Business Services (+7.3%) sectors.
A Favorable Revisions Trend, Driven by the Tech Sector
Elevated headline risks resulting from geopolitical turmoil have joined pre-existing worries about the future of software businesses and the seemingly ever-rising spending by the Mag 7 companies. Sentiment as a result has been downbeat on the Mag 7 and software stocks, as the year-to-date performance chart of the Mag 7 stocks, the Zacks Tech sector, the Zacks Finance sector, and the S&P 500 index shows.
Image Source: Zacks Investment Research
There is a fair amount of overlap between the Mag 7 stocks and the Tech sector, but the Zacks industry classification system places two of the Mag 7 stocks – Amazon AMZN and Tesla TSLA – outside the Tech sector, with Amazon in the Zacks Retail sector and Tesla in the Zacks Auto sector.
The soft sentiment on the Mag 7 stocks and Tech sectors notwithstanding, these two spaces represent the most robust profitability centers in the entire S&P 500 index, with a steadily improving earnings outlook reflected in positive estimate revisions.
For 2026 Q1, the Zacks Tech sector is expected to produce +23.7% earnings growth on +21.2% higher revenues, as the chart below shows.
Image Source: Zacks Investment Research
The Tech sector has been a critical pillar of aggregate earnings growth since 2023 Q3 and is expected to play that role in 2026 Q1 as well.
For Q1 as a whole, total S&P 500 earnings are expected to be up +11.3% from the same period last year. But the aggregate growth pace drops to +5% once the Tech sector’s contribution is excluded.
Even more importantly, estimates for the Tech sector are steadily going up, notwithstanding the aforementioned sentiment issues, as the chart below shows.
Image Source: Zacks Investment Research
In fact, the positive revisions trend for the Tech sector has been key to keeping the aggregate revisions trend in positive territory, offsetting pressure on estimates elsewhere.
The Tech sector is one of the four sectors whose 2026 Q1 earnings estimates have increased since the start of October 2025; the other three sectors enjoying favorable revisions are Finance, Industrial Products, and Business Services.
The Earnings Big Picture
The chart below shows expectations for 2026 Q1 in terms of what was achieved in the preceding five periods and what is currently expected for the following three quarters.
Image Source: Zacks Investment Research
As noted earlier, the revisions trend for the current period (2026 Q1) has held reasonably well, as the chart below shows.
Image Source: Zacks Investment Research
The chart below shows the overall earnings picture for the S&P 500 index on an annual basis.
Image Source: Zacks Investment Research
The estimate revisions trend in the aggregate remains positive, even though there is plenty of churn at the sector level. Importantly, favorable revisions in the Tech and Finance sectors are helping offset pressures in other sectors.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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